Architect / Developer - Building in California (For a Profit)

[William Samuel Johnson]

My Current Deal; 

Area : Lake Elsinore, CA 

Land location : 30 Silver St. Lake Elsinore, CA 

Link : https://www.zillow.com/homedetails/30-Silver-St-Lake-Elsinore-CA-92530/2089090603_zpid/

Land Cost : 54,900 | .9 ACRES ( Without negotiation ) 

Program : 3 Bed 2.5 Bath - 1,591 Sq. Ft. 

Price / Sq. Ft. = $125

My Due Diligence

- Average selling price in Lake Elsinore = $390,000

- Homes sell for around list price and go pending in around 48 days.

- Average Income in Lake Elsinore = $63,303 / Year - which means the average person can afford a $350,000 home. 

- Pardee Homes have started developing homes starting in the mid 300's - 3 bed, 2.5 bath - 1,794 - 2,288 Sq. Ft. 
Link- https://www.pardeehomes.com/inland-empire/westlake/

Land / City Analysis : 

Zoning : R-1 Single Family Residential District 

Geo-technical Engineer - Identified Granitic Bedrock in the surrounding Area

Sewer Tap fee = $52,000

Water Tap Fee = $17,500

Real Estate Agent broker fee = $24,000

Building Permits = $4,392

Design Review Committee = N/A  ( Not Required )

Pro Forma 

Projected profit = $76,933 (24%)

Architectural Rendering 

Apparently, Bigger Pockets won't let me attach more than one image, So I will try to attach my Pro Forma along with my Floor plans. 

I'd really like to get a discussion going about how people are approaching the Owner / Developer and in my case the Arch Designer / Developer Business model. 

[William Samuel Johnson]

Question # 1 : I had the same question, where did the $125 construction cost come from? Think you will get it for $175-$200 range for construction.

- Production home Builders can build a Spec Home for around $110 / Sq. Ft.
(Based on my Architectural Experience working with Shea Homes, Richmond Homes, Toll Brothers) 

For instance; take a look at the available floor plans presented by Pardee Homes. 

- Notice how they are designing with 3 Flat sides. This is one of the many ways they are able to achieve that 110 / Sq. Ft. 

- Also, every home builder I worked with always required the design to achieve minimal ADA Code Compliance. 

The result? There is literally no wasted space. Every inch is maximized. 

Question # 2 : Are you trying to sub everything out yourself to keep cost down?

- I've thought about it, but in order to reduce risk, I'm going to a General Contractor for this particular Build.  The contract I'll be using is the AIA - A101 Owner / Contractor Agreement with Lump Sum Fixed Fee W/ GMP. 

I'm using the GMP (Guaranteed Maximum Price) as part of my fee structure to prevent any excessive change orders and to motivate the contractor to finish the project within the agreed schedule. 

Question # 3 : Why are you doing 1,591 sq ft is that the max allowed for this lot?

- My program was Based on the Comparables in the surrounding area

(Next door neighbors program is 3 Bed 2.5 Bath 1,600 Sq. Ft.)

- The maximum F.A.R (Floor to Area Ratio) = 50% , 

To answer your question, No - I'm not building the max for this lot. I don't want to overbuild the area.  

Question # 4 : I Think you are underestimating permit fees.

- I've performed all my Due diligence thoroughly, those Permit Fees are exactly what the City / Municipal Code are requiring. 

- This was one of my job duties when I was working with Hayer Architecture in Del mar, CA. I've been through this process many times working with Custom Home Clients. 

Question # 5 : How long in this city does it take to approve plans. 

- Typically it takes anywhere from 3 - 4 Months. Depending on if you need to have DRC approval and how busy the Building Dept. is. 

Per your question about the design element for the mailbox and entry;

- I can take it off to make more profit. In this case, it works with my numbers and I'm happy with my 24% ROI.

I hope I answered all your questions. I'm Looking forward to continuing this discussion.